Oakland panel votes to increase medical cannabis clubs from four to eight

After six years of limiting to four the number of medical cannabis dispensaries that can legally operate in Oakland, city officials are poised to double that cap.

Along with new legislation that would increase the number of licensed clubs to eight, the Oakland Public Safety Committee voted unanimously Tuesday to double the annual fees paid by the clubs from $30,000 to $60,000, which city staff members estimate is a more realistic cost to oversee eight dispensaries.

The ordinance was introduced by councilmembers Larry Reid and Rebecca Kaplan. The full City Council will make its decision Oct. 19.

Oakland set a four-club limit on pot dispensaries in March 2004 and culled the proliferation of clubs that had sprung up around an area of downtown known as Oaksterdam.

Aside from recent problems with one club that was shuttered by the city in December, the remaining dispensaries -- Coffeeshop Blue Sky, Harborside Health Center and Purple Heart Patient Center -- have been model businesses that have contributed to the city's cash-strapped coffers in the form of business taxes and sales taxes, officials said.

Now, they will have to be prepared to pay more.

The permit fees will be used to hire additional administrative, financial and code enforcement staff to monitor, audit and regulate the businesses to make sure there is no diversion of product or sales and that the businesses operate as permitted.

Staff will have to review documentation records and inspect the facilities to make sure they are up to code and to make regular and unscheduled site inspections.

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New dispensaries will also be charged a one-time business application fee of $5,000, the same fee new cultivation businesses will pay.

The application fee will pay for city staff to conduct background checks and review security, business and building plans.

If voters approve Measure V next month, the supplemental sales tax rate paid by medical marijuana clubs will increase from 1.8 percent to 5 percent, or $50 for every $1,000 worth of product sold.

That would generate an estimated $1.4 million for the city if there were only four dispensaries and sales stayed flat, which is not likely.

That tax is on top of the 9.25 percent sales tax paid by all licensed businesses in Oakland.

The city's four clubs reported $28 million in sales last year, a 40 percent increase from 2008.

But it could have been much higher. The Berkeley Patients Group collective in South Berkeley said more than 6,000 of its customers live in Oakland.

David Stogner, the collective's patient services coordinator, said the Oakland residents travel to Berkeley because it's the closest dispensary.

Two of Oakland's dispensaries are located near downtown, and the third is in the Central waterfront area. There are no clubs in North, West or East Oakland.

Ada Chan, legislative analyst to Councilmember Rebecca Kaplan, said there is a list of nearly 200 people who have expressed interest in opening a dispensary in Oakland.

One of those is Angel Raich, a longtime medical cannabis patient and advocate who supports the increase in dispensaries as a way to increase competition, improve the product and make it easier for patients to get their medicine.

Leona Held, a Montclair resident and business owner, also supports the increase.

"I have to drive over 35 minutes to get to the closest dispensary in rush-hour traffic," Held said.

Under the ordinance, the dispensaries must be located in commercial or industrial zones and cannot be located within 600 feet of a public school, library, park and recreation center, or a residential area, which is a change from the 1,000-foot separation required by Oakland's current law.

Both Councilmembers Jean Quan and Patricia Kernighan had been leaning toward increasing the number of permits from four to six, but went along with the proposal after a city official assured them that staff would closely monitor the locations.

Councilmember Nancy Nadel said she would even support 12 dispensaries, based on the number of patients in Oakland.